“And then what?” Why the past has limited value when it comes to supply chain security

When looking at supply chain risk management, many business leaders are still talking about the past and not looking to the future. But the world is currently facing a food crisis that will reverberate throughout the supply chain and if businesses don’t start looking ahead, they’re going to fall behind.

The world is heading into a food crisis, the impact of which will be felt throughout the supply chain. A change or shock in one part of the supply chain ripples through to downstream producers. The war in Ukraine is central to this, while climate change and other geopolitical issues are also at play.

The World Food Program receives 40% of its grain from Ukraine. Any disruption in supply will have the biggest impact on the populations with the greatest need, such as Bangladesh, Indonesia, Vietnam and Turkey.

Many of the world’s largest brands rely on these exact countries to manufacture the products that they sell. Textile manufacturers, for example, will feel the impact of a food crisis as workers become less productive and, in some cases, even relocate to a place where food is more readily available.

After two years of the pandemic, historical data is all over the place – some industries and sectors are up, some are down. Product shortages, such as paper products in the US, left store shelves bare. Panic buying, hoarding and out of stock situations have made historical data unusable.

Organizations that plan their supply chain risk mitigation strategies based on historical data are not going to be prepared for the crisis. They must act now to build new capabilities to manage current and future risks. The saying goes that “history repeats itself”. But I don’t think it does. We should take on the lessons of the past, but we shouldn’t assume things won’t change.

‍And then what?

The question I ask my clients all the time is, “and then what?”

For example, if the global food shortage hits India or Vietnam – then what? Are workers going to be able to show up and be productive? Are they going to leave to go somewhere where they can feed their families?

The goal is to get clients to think three or four steps ahead of where they are now.

Ultimately, this question comes down to problem solving. For companies that manufacture their products around the world, it is their responsibility to ensure food security for the people in the communities they rely on to operate their factories.

My advice to executives is to take their teams out of the office to somewhere where they can really take a step back and think about the bigger picture. Leading their teams through various scenarios, the executives should ask – what is going on in the world and what are the potential implications for us? How do we best prepare to meet this? And then what?

Getting teams to carefully think through the implications of various scenarios is critical. Using game theory to do this can help with understanding the risks from a global supply chain standpoint.

‍Planning for the future

I talk to a lot of clients who ask me to help them figure out their demand planning and forecasting because they’ve found that all the models are now broken. And it’s true, the models are broken. They’re broken because we can’t use history as our guide. Unfortunately, there are a lot of organizations who don’t recognize that and are still trying to use the past to plan for the future.

One of the things we’ve developed at UST is a service, UST Omni, that incorporates machine learning and advanced analytics to separate true demand signals from noise, allowing planners to focus on meaningful data. Clients can use the tool to organize known risks, set thresholds, monitor activities, evaluate risk events and take action to mitigate these risks.

We’re increasingly looking at unstructured data, like social media, to build these datasets and better understand demand and risk. If we take groceries as an example, instead of just looking at previous sales cycles now we’re picking up signals from places like Instagram. This data shows us the meals people are creating today and how it correlates with what we’re trying to accomplish. The technology has become so advanced now that you really can use these non-traditional signals.

Many executives already manage risk, the problem is that they are managing it in their heads, in isolation and with incomplete information. The food crisis is a very real issue that’s happening right now. Looking to the past won’t give organizations the information they need. Instead, they need to be using advanced analytics tools to accurately plan for future demand and strain on the supply chain. It’s time to start asking “and then what?” not “what did we do last time?”